Bill > S2358

Introduced Session

This bill requires registration of private education lenders and establishes protections for private education borrowers. Under the bill, a private education lender means any person engaged in the business of securing, making, or extending private education loans, or any holder of a private education loan. "Private education lender" does not include certain financial institutions, to the extent that State regulation is preempted by federal law. The bill provides that a "private education loan" is an extension of credit that: (1) is not made, insured, or guaranteed under Title IV of the "Higher Education Act of 1965," 20 U.S.C. s.1070 et seq.; (2) is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the loan is provided by the educational institution that the student attends; (3) does not include open-end credit or any loan that is secured by real property or a dwelling; and (4) does not include an extension of credit in which the covered educational institution is the creditor, in certain circumstances. The bill prohibits a person from extending student financing or a private education loan to a resident of this State without first registering with the Commissioner of Banking and Insurance as a student financing company. The bill requires student financing companies to register with the commissioner pursuant to any registration procedures set forth by the commissioner by regulation. Student financing companies are also required to provide the commissioner, at the time of registration and not less than once per year thereafter, with information on the schools at which the company has provided borrowers funding to attend; the volume of loans made annually to borrowers residing in this State; and the default rate for borrowers obtaining loans from the company. The bill also requires student financing companies to provide the commissioner a copy of the promissory note, agreement, contract or other instrument used by the company during the previous year to substantiate that a private education loan has been extended to a borrower or that a borrower owes a debt to the company. The bill requires the commissioner to create a publicly accessible website that includes the information about student financing companies registered in the State, including the name, address, telephone number and website for all registered student financing companies; a summary of the information submitted by the lender during registration; and copies of all model promissory notes, agreements, contracts, or other instruments provided to the commissioner. The bill provides that the commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of the registration provisions of the bill. Each violation, including any order, rule or regulation made or issued pursuant to the bill, constitutes a separate offense. Additionally, each violation which constitutes a knowing violation is a crime of the third degree. The bill requires private education lenders to deliver certain information to a cosigner prior to the extension of a private education loan that requires a cosigner. The lender must inform the cosigner: (1) how the private education loan obligation will appear on the cosigner's credit; (2) how the cosigner will be notified if the private education loan becomes delinquent, including how the cosigner can cure the delinquency in order to avoid negative credit furnishing and loss of cosigner release eligibility; and (3) eligibility for release of the cosigner's obligation on the private education loan, including the number of on-time payments and any other criteria required to approve the release of cosigner from the loan obligation. For any private education loan that obligates a cosigner, a lender is required to provide the borrower and the cosigner an annual written notice containing information about cosigner release, including the administrative, non-judgmental criteria the lender requires to approve the release of the cosigner from the loan obligation and the process for applying for cosigner release. Under the bill, if the borrower has met the applicable payment requirement to be eligible for cosigner release, the lender must send the borrower and the cosigner a written notification by mail and by electronic mail, where a borrower or cosigner has elected to receive electronic communications from the lender, informing the borrower and cosigner that the payments requirement to be eligible for cosigner release have been met. The notification is also required to include information about any additional criteria to qualify for cosigner release, and the procedure to apply for cosigner release. The bill requires a lender to provide written notice to a borrower who applies for cosigner release, but whose application is incomplete. The written notice must include a description of the information needed to consider the application complete and the date by which the applicant must furnish the missing information. The bill provides that, within 30 days after a borrower submits a completed application for cosigner release, the lender is required to send the borrower and cosigner a written notice that informs the borrower and cosigner whether the cosigner release application has been approved or denied. The bill prohibits a lender from imposing any restriction that permanently bars a borrower from qualifying for cosigner release, including restricting the number of times a borrower may apply for cosigner release. The bill prohibits a lender from requiring greater than 12 consecutive, on-time payments as criteria for cosigner release. Any borrower who has paid the equivalent of 12 months of principal and interest payments within any 12-month period must be considered to have satisfied the consecutive, on-time payment requirement, even if the borrower has not made payments monthly during the 12-month period. Under the bill, if a borrower or cosigner requests a change in terms that restarts the count of consecutive, on-time payments required for cosigner release, the lender must notify the borrower and cosigner in writing of the impact of the change and provide the borrower or cosigner the right to withdraw or reverse the request to avoid that impact. The bill provides that a borrower has the right to request an appeal of a lender's determination to deny a request for cosigner release, and the lender is required to permit the borrower to submit additional documentation evidencing the borrower's ability, willingness, and stability to meet the payment obligations. The borrower may request review of the cosigner release determination by another employee. The bill requires lenders to establish and maintain a comprehensive record management system reasonably designed to ensure the accuracy, integrity, and completeness of data and other information about cosigner release applications and to ensure compliance with applicable state and federal laws. The bill prohibits private education loans executed after the effective date of the bill from including a provision that permits the private educational lender to accelerate, in whole or in part, payments on the private education loan, except in cases of payment default. A lender may not place any loan or account into default or accelerate a loan for any reason, other than for payment default. The bill provides that, in the event of the death of a cosigner, the lender may not attempt to collect against the cosigner's estate, other than for payment default. Upon receiving notification of the death or bankruptcy of a cosigner, when the loan is not more than 60 days delinquent at the time of the notification, the lender may not change any terms or benefits under the promissory note, repayment schedule, repayment terms, or monthly payment amount or any other provision associated with the loan. The bill requires private education lenders, when notified of the total and permanent disability of a borrower or cosigner, to release any cosigner from the obligations of the cosigner under a private education loan. The lender may not attempt to collect a payment from a cosigner following a notification of total and permanent disability of the cosigner or borrower. The bill requires lenders to notify borrowers and cosigners if a cosigner or borrower is released from the obligations of the private education loan within 30 days of the release. The bill requires lenders that extend private education loans to provide the borrower the option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the private education loan in the event of the total and permanent disability of the borrower. In the event a cosigner is released from the obligations of a private education loan, a lender may not require the borrower to obtain another cosigner on the loan obligation. The bill provides that lenders may not declare a default or accelerate the debt against the borrower on the sole basis of the release of the cosigner from the loan obligation. The bill requires lenders, when notified of the total and permanent disability of a borrower, to discharge the liability of the borrower and cosigner on the loan. After receiving a notification notified of the total and permanent disability of a borrower, the lender may not attempt to collect on the outstanding liability of the borrower or cosigner or monitor the disability status of the borrower at any point after the date of discharge. The bill requires private education lenders to deliver a statement that benefits and protections applicable to an existing loan may be lost due to refinancing before offering a person a private education loan that is being used to refinance an existing education loan. This information must be provided on a one-page information sheet in a 12-point font and shall be written in simple, clear, understandable and easily readable language. If a private education lender offers any borrower flexible repayment options in connection with a private education loan, those flexible repayment options must be made available to all borrowers of loans by the lender. The bill requires lenders to: (1) provide on their website a description of any alternative repayment option offered by the lender for private education loans; (2) establish policies and procedures and implement them consistently in order to facilitate evaluation of private education loan flexible repayment option requests, including providing accurate information regarding any private education loan alternative repayment options that may be available to a borrower through the promissory note or that may have been marketed to a borrower through marketing materials; and (3) consistently present and offer private education loan repayment options to borrowers with similar financial circumstances, if the lender offers repayment options. The bill provides that a private education lender may not: (1) offer any private education loan that is not in conformity with this act, or that is in violation of any other State or federal law; (2) engage in any unfair, deceptive, or abusive act or practice; (3) make a private education loan upon security of any assignment of or order for the payment of any salary, wages, commissions or other compensation for services earned, or to be earned; or (4) make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, in any manner, any statement or representation which is false, misleading or deceptive. The bill requires private education lenders to establish and maintain records and permit the department to access and copy any records required to be maintained pursuant to the bill. Loan files, including any records specified for retention by regulation adopted by the commissioner, must be retained for not less than six years after the termination of the loan account. The bill provides that, in addition to any other information required under applicable federal or State law, a debt collector attempting to collect a private education loan must provide in the first debt collection communication with the borrower and at any other time the borrower requests this documentation: (1) the name of the owner of the private education loan debt; (2) the original creditor's name at the time of default, if applicable; (3) the original creditor's account number used to identify the private education loan debt at the time of default, if the original creditor used an account number to identify the private education loan debt at the time of default; (4) the amount due at the time of default; (5) a schedule of all transactions credited or debited to the student loan account; (6) a copy of all pages of the contract, application or other documents evidencing the private education loan borrower's liability for the private education loan, stating all terms and conditions applicable to the private education loan; and (7) a clear and conspicuous statement disclosing that the borrower has a right to request all information possessed by the creditor related to the defaulted private education loan debt. The bill prohibits creditors from collecting or attempting to collect a private education loan debt unless the creditor possesses: (1) the name of the owner of the private education loan; (2) the original creditor's name at the time of default, if applicable; (3) the original creditor's account number used to identify the private education loan at the time of default, if the original creditor used an account number to identify the private education loan at the time of default; (4) the amount due at default; (5) a schedule of all transactions credited or debited to the student loan account; (6) an itemization of interest and fees, if any, claimed to be owed and whether those were imposed by the original creditor or any subsequent owners of the private education loan; (7) the date that the private education loan was incurred; (8) a billing statement or other account record indicating the date of the first partial payment or the first day that a payment was missed, whichever is earlier; (9) a billing statement or other account record indicating the date of the last payment made by the borrower, if applicable; (10) any payments, settlement, or financial remuneration of any kind paid to the creditor by a guarantor, co-signer, or surety, and the amount of payment received; (11) a copy of the self-certification form and any other needs analysis conducted by the original creditor prior to origination of the loan; (12) the names of all persons or entities that owned the private education loan after the time of default, if applicable, and the date of each sale or transfer; (13) a log of all collection attempts made in the last 12 months including date and time of all calls and letters; (14) copies of all settlement letters made in the last 12 months, or, in the alternative, a statement that the creditor has not attempted to settle or otherwise renegotiate the debt prior to suit; (15) a copy of all pages of the contract, application or other documents evidencing the private education loan borrower's liability for the private education loan, stating all terms and conditions applicable to the private education loan; and (16) documentation establishing that the creditor is the owner of the specific individual private education loan at issue. Following a payment default on a private education loan by a borrower, and before a creditor may accelerate the maturity of the loan or commence a legal action against the borrower, a lender is required to provide to the borrower a notice of intention to accelerate the loan. The creditor must provide the notice at least 30 days, but not more than 180 days, in advance of the action, and must provide a copy of the notice to the department at the same time it is provided to the borrower. Notice of intention to take action is required to be in writing, provided to the Department of Banking and Insurance, and sent to the borrower by registered or certified mail, return receipt requested, at the borrower's last known address. The notice is deemed to be effectuated on the date the notice is delivered in person or mailed to the party. The bill provides that an action to enter a default judgment against a borrower must be commenced with in six years of the date the borrower failed to make a payment. The bill requires a creditor or lender seeking to enter a default judgment against a borrower to attach the following documentation and information to a complaint, filed in a court of competent jurisdiction: (1) a copy of the notice of intention provided pursuant to the bill, including the information provided to the borrower pursuant to that notice; (2) the date of the first partial or missed payment; (3) the date of the last payment, if applicable; (4) a copy of any self-certification or needs analysis conducted by the original creditor prior to origination of the loan; (5) a statement as to whether the creditor is willing to renegotiate the terms of the debt; (6) a statement as to whether the debt is eligible for any flexible repayment option; and (7) a statement as to whether the debt is dischargeable in bankruptcy. If a creditor or lender fails to comply with the filing requirements of the bill, a borrower may bring an action, including a counterclaim, against the creditor to recover or obtain certain relief and damages. The bill also provides that a borrower or cosigner who suffers damage as a result of a violation may bring an action in a court of competent jurisdiction to recover: actual damages, but in no case less than $500; an order enjoining the methods, acts, or practices; restitution of property; punitive damages; attorney's fees; and any other relief that the court deems proper.

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Sandra Cunningham (D)*,  Vin Gopal (D)*,  Teresa Ruiz (D), 

Assembly Higher Education Hearing (10:45 3/8/2021 Registration Form) (on 03/08/2021)